Tornado Cash transactions are now blocked from being processed by Ethermine, a protocol-level form of censorship.
Right now, the dream of a free and open internet that doesn’t rely on a central authority is at risk. The biggest Ethereum mining pool, Ethermine, has stopped producing blocks that include Tornado Cash transactions. This is an instance of protocol-level filtering, most likely caused by OFAC penalties.
Takens Theorem, a crypto expert, uncovered that Ethermine has stopped processing Tornado Cash transactions and provided the following graph to demonstrate this. When CryptoSlate checked on-chain data, we found that Ethermine had not generated a block containing a Tornado Cash transaction within the specified time period.
To identify an Ethermine-mined block that contains a Tornado Cash transaction, we need to travel back around 10 days. The transaction block id 15306892 was successfully mined by the Ethermine mining pool on August 9th. Tornado Cash executed a transaction for 10 ETH in this block.
Recent transactions on the Tornado Cash Router indicated that several different miners, including Hiveon, P2Pool, and 2Miners, are the network’s primary users.
What’s the big deal, anyway?
For what reason does this matter? After the United States recently sanctioned Tornado Cash via OFAC, any interaction between U.S. entities and the protocol is prohibited.
After this ban, Circle “blacklisted” USDC on the Ethereum network, rendering the Tornado Cash smart contract inoperable for any holder who has ever dealt with it. All $USDC transactions processed by Tornado Cash were effectively halted as a result of this action.
Then, DeFi protocols like Aave, Uniswap, Balancer, and others included an API from TRM Labs that effectively banned addresses blacklisted by OFAC by disabling the dApps’ front ends.
A hacker “dusted” addresses with 0.1 ETH to draw attention to a major problem with the sanctions, and Aave apparently restored access to those addresses. The Office of Foreign Assets Control has blacklisted any IP address that has communicated with Tornado Cash. Hence, the hacktivist’s sending of 0.1 ETH to various prominent figures in the crypto industry demonstrated that the penalties were readily exploitable.